Department of Revenue Tax on Tenant Improvements

For any interested parties, this is the letter sent to the members of the Florida Gulf Coast Commercial Association of Realtors (Please take a moment to contact your legislators):

FROM GOVERNMENT AFFAIRS COMMITTEE: Please read and take action to defeat this proposed tax.

Dear Interested Party and Fellow Brokers;

The Department of Revenue is trying to impose sales tax on Tenant Improvements.

This includes any and all real estate that incorporates tenants. This tax is in addition to the sales tax paid on the materials to build the tenant improvements and the real estate tax paid on the improvements.

Please assist us in defeating this tax on tax. A form letter is printed below, listing who to send it to, and who to copy it to.  Attached is a list of our legislators, too. Please spend a few minutes assisting us in defeating this outrageous attempt to double tax our industry. We need your help.

Receipt deadline is October 20  so it must be sent by October 15, 2011 to safely reach Tallahassee.  If so inclined, feel free to change the wording.

Also feel free to call any politician you know and voice your opinion on this issue. Get involved and thank you in advance.

Sincerely,
FGCAR, NAIOP, BOMA, CBA,
FR and others

Any questions?  Feel free to call Bob Zegota at 813-263-4867 or Avi Adler at 813-463-3618

Letter to DOR:

French Brown
Deputy Director, Technical Assistance and Dispute Resolution
Department of Revenue
PO Box 7443.
Tallahassee, Florida 32314-7443

Dear Department of Revenue:

On September 21, 2011 a workshop was held to determine whether to charge Sales tax on tenant improvements for commercial real estate projects.
According to the State Statute 212.031 (2) (b):
(b)  It is the further intent of this Legislature that only one tax be collected on the rental or license fee payable for the occupancy or use of any such property, that the tax so collected shall not be pyramided by a progression of transactions, and that the amount of the tax due the state shall not be decreased by any such progression of transactions.

This proposed rule is not only in conflict with the law as stated above, but also bad for small business in Florida for the following reasons:

• It is double taxation or pyramiding as referenced in the statute.
• Tenant improvements are 2 components, materials and labor. Materials are already sales taxed. Labor is taxed in many other aspects of government. Given the current economic climate, some landlords do not have capital to perform improvements on behalf of potential tenants. So the tenants do it to improve their business climate. They too then would experience double taxation. In this market, profit margins are marginal.  A 6-7% variance of costs to a tenant or landlord can make or break a deal.
• Once improvements are made, the Property appraiser reassesses the property to include tenant improvements in property taxes. Your proposal taxes this tax resulting indouble taxation. Tenant improvements are tenant specific. Once a tenant vacates, the tenant improvements have little, if any, residual value to the property. The lease itself is already taxed at 6-7% including CAM charges which are also made up of taxes and insurance and are normally tax exempt. Many leases include the costs of tenant improvements amortized over the life of the lease.
• Cost of government and add on taxes have already devastated the commercial real estate industry. CRE is sales taxed, property taxed, corporate taxed, utility taxed, income taxed, license taxed, and so on. One more tax could bury an already struggling industry.
• Taxes are already running amuck. Attempting to add another tax to items that are either already taxed or in other instances exempted, places an unfair burden on a narrow segment of the business population in our state. Our Governor promised no new taxes. Why would you attempt this in these trying times?I wish to go on record as a person who adamantly opposes any new tax of any sort, especially those taxes which are nothing more than double taxation.

  Sincerely,

  Cc: Governor Rick Scott
  My Legislator

  =================================================

  Information Sheet
  Send your letter to:
  French Brown
  Deputy Director, Technical Assistance and Dispute Resolution
  Department of Revenue
  PO Box 7443.
  Tallahassee, Florida 32314-7443
  Email: [email protected]
  In subject line include 12A-1.070 Workshop 9-21-11

  And:

  Office of Governor Rick Scott
  State of Florida
  The Capitol
  400 S. Monroe St
  Tallahassee, FL 32399-0001
  (850) 488-7146
  His e-mail:
  [email protected]

  Legislators: See Attached

  Please copy any letters, emails or anything else to [email protected]

This is to insure they receive everything and that we can track who and how many are involved. Your information will not be used for anything but this task
and will be kept otherwise confidential

DEADLINE FOR RECEIPT
BY DOR IS October 20,2011.